CSE & Enterprise Systems CenterLehigh University1 Roger N. Nagel © 2006Organizational Behavior and Organizational Change DecisionsRoger N. NagelSenior Fellow & Wagner ProfessorLehigh UniversityCSE & Enterprise Systems CenterLehigh University2 Roger N. Nagel © 2006Topics This Presentation Decision making in OB¾ Steps in the Decision-Making Model¾ Common Biases and Errors¾ Intuitive Decision Making¾ Organizational Constraints on Decision Makers¾ Potential Cultural Differences in Decision Making¾ Ethics in Decision Making Ways to Improve Decision Making¾ Reducing Bias and Errors“Organizational behavior”Eleventh EditionBy Steve RobbinsISBN 0-13-191435-9Reference Book“Organizational behavior”Eleventh EditionBy Steve RobbinsISBN 0-13-191435-9Reference Book2o r g a n i z a t i o n a l b e h a v i o ro r g a n i z a t i o n a l b e h a v i o rstephen p. robbinse l e v e n t h e d i t i o ne l e v e n t h e d i t i o nCSE & Enterprise Systems CenterLehigh University3 Roger N. Nagel © 2006How Are Decisions Actually Made in OrganizationsSimplifyingIndividuals make decisions by constructing simplified models that extract the essential features from problems without capturing all their complexity.CSE & Enterprise Systems CenterLehigh University4 Roger N. Nagel © 2006How Are Decisions Actually Made in Organizations How/Why problems are identified¾ Visibility over importance of problem» Attention-catching, high profile problems» Desire to “solve problems”¾ Self-interest (if problem concerns decision maker) Alternative Development¾ Satisfying: seeking the first alternative that solves problem.¾ Engaging in incremental rather than unique problem solving through successive limited comparison of alternatives to the current alternative in effect.CSE & Enterprise Systems CenterLehigh University5 Roger N. Nagel © 2006What should we do? Identify Problems Opportunities  Develop Alternative approachesCSE & Enterprise Systems CenterLehigh University6 Roger N. Nagel © 20061. Define the problem or opportunity.2. Identify the decision criteria.3. Allocate weights to criteria.4. Develop the alternatives.5. Evaluate the alternatives.6. Select the best alternative.1. Define the problem or opportunity.2. Identify the decision criteria.3. Allocate weights to criteria.4. Develop the alternatives.5. Evaluate the alternatives.6. Select the best alternative.Steps in the Decision-Making ModelE X H I B I T 5–3 Page 144E X H I B I T 5–3 Page 144Assumptions• Problem clarity• Known options• Clear preferences• Constant preferences• No time or cost constraints• Maximum payoffAssumptions• Problem clarity• Known options• Clear preferences• Constant preferences• No time or cost constraints• Maximum payoffCSE & Enterprise Systems CenterLehigh University7 Roger N. Nagel © 2006Discussion of steps and assumptions What left out?¾¾¾¾¾¾ What should be added?¾¾¾¾¾¾6Assumptions• Problem clarity• Known options• Clear preferences• Constant preferences• No time or cost constraints• Maximum payoffAssumptions• Problem clarity• Known options• Clear preferences• Constant preferences• No time or cost constraints• Maximum payoff1. Define the problem.2. Identify the decision criteria.3. Allocate weights to criteria.4. Develop the alternatives.5. Evaluate the alternatives.6. Select the best alternative.1. Define the problem.2. Identify the decision criteria.3. Allocate weights to criteria.4. Develop the alternatives.5. Evaluate the alternatives.6. Select the best alternative.CSE & Enterprise Systems CenterLehigh University8 Roger N. Nagel © 2006The Three Components of CreativityCreativityThe ability to produce novel and useful ideas.Three-Component Model of CreativityProposition that individual creativity requires expertise, creative-thinking skills, and intrinsic task motivation.E X H I B I T 5–4 Page 146E X H I B I T 5–4 Page 146Source: T.M. Amabile, “Motivating Creativity in Organizations,” California Management Review, Fall 1997, p. 43.CSE & Enterprise Systems CenterLehigh University9 Roger N. Nagel © 2006Common Decision Biases and Errors1. Overconfidence Bias¾ Believing too much in our own decision competencies.2. Anchoring Bias¾ Fixating on early, first received information.3. Confirmation Bias¾ Using only the facts that support our decision.4. Availability Bias¾ Using information that is most readily at hand.5. Representative Bias¾ Assessing the likelihood of an occurrence by trying to match it with a preexisting category.Page 148 -151CSE & Enterprise Systems CenterLehigh University10 Roger N. Nagel © 2006Common Decision Biases and Errors6. Escalation of Commitment¾ Increasing commitment to a previous decision in spite of negative information.7. Randomness Error¾ Trying to create meaning out of random events by falling victim to a false sense of control or superstitions.8. Hindsight Bias¾ Falsely believing to have accurately predicted the outcome of an event, after that outcome is actually known.Page 148 -151CSE & Enterprise Systems CenterLehigh University11 Roger N. Nagel © 2006Rate the decision making of your subordinates. How often do they make each type of error?1. Overconfidence Bias _______ (Never, occasionally, often)¾ Believing too much in our own decision competencies.2. Anchoring Bias _______ (Never, occasionally, often)¾ Fixating on early, first received information.3. Confirmation Bias _______ (Never, occasionally, often)¾ Using only the facts that support our decision.4. Availability Bias _______ (Never, occasionally, often)¾ Using information that is most readily at hand.5. Representative Bias _______ (Never, occasionally, often)¾ Assessing the likelihood of an occurrence by trying to match it with a preexisting category.6. Escalation of Commitment _______ (Never, occasionally, often)¾ Increasing commitment to a previous decision in spite of negative information.7. Randomness Error _______ (Never, occasionally, often)¾ Trying to create meaning out of random events by falling victim to a false sense of control or superstitions.8. Hindsight Bias _______ (Never, occasionally, often)¾ Falsely believing to have accurately predicted the outcome of an event, after that outcome is actually known.Page 148 -151CSE & Enterprise Systems CenterLehigh University12 Roger N. Nagel © 2006Intuition